DoubleLine's Gundlach Sees Repricing Lower in Risk Assets; ABX Dropped 20%; BAC Testing $11 Support

Source: CNBC
Jeffrey Gundlach, founder and CEO of DoubleLine Capital with $11 billion+ under management (+17% in 1-year), was on CNBC's Strategy Session on May 24 sharing his views on the market. With home prices making new lows, Gundlach said the "underlying metrics" (recovery rates) of legacy debt issued at the peak of the housing bubble (2006-2007) seem to be deteriorating, and non-performing loans in the whole loan market are not being marked-to-market or "fully reserved for." Watch CNBC video #2 for more details. In addition, Gundlach said the "many multiples of derivatives attached" to the debt is an unknown risk.
ABX.HE.AAA.07-01 via Markit

He pointed out that the market was already pricing in this risk. The ABX Index (subprime mortgage-backed securities credit default swap index) was down 20% in the last three months and Bank of America (which he says is a proxy for the ABX Index at the Ira Sohn conference) was down 26% ($15 to $11). $11 is an important support level to hold on the chart. If $BAC breaks $11 it will visit levels not seen since April and May of 2009.
$BAC -

In the first video Gundlach mentioned that he wasn't a buyer or seller of 10-year Treasurys at 3.25%. He is waiting for the market to make a move as QE2 ends and uncertainties continue with the debt ceiling and potential fiscal constraint. Oh and he is bullish on natural gas and would rather hold gemstones in his sock than carry gold (via Ira Sohn Conference). Lastly, Gundlach mentioned that he "sees a repricing lower in risk assets". He has 10% of assets in cash.

CNBC Video #1 featuring Jeffrey Gundlach (Source)

CNBC Video #2 featuring Jeffrey Gundlach (Source)

Gundlach was also interviewed by Business Insider

Related Posts


HTML Comment Box is loading comments...